Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is-manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15 per ball, of which 60% is direct labor cost. Last year, the company sold 30,000 of these balls, with the following results: Sales (30,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 750,000 450,000 300,000 210,000 $ 90,000 Required: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3 per ball. If this change takes place and the selling price per ball remains constant at $25, what will be next year's CM ratio and the break-even point in balls? 3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how maev will have to be sold next year to earn the same net operating income, $90,000, as last year 4. Refer again to the data in (2) above. The president feels that the company must raisearre selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as laras computed in requirement 10), what selling price per ball must it charge next year to cover the Sefer to the original data. The company is discussing the construction W automated eased labor costs? 5. Refer to suriginal data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company's new CM ratio and new break-even point in balls? S. Refer to the data in (5) above. a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $90,000, as last year? b. Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Reg 3 Reg 4 Reqs Req 6A Req 6B Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at sales level. (Round "Degree of operating leverage" to 2 decimal places.) CM ratio 64% Unit sales to break even 26,250 balls Degree of operating leverage Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req 3 Reg 4 Req5 Req 6A Req 6B Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at sales level. (Round "Degree of operating leverage" to 2 decimal places.) CM ratio Unit sales to break even balls Degree of operating leverage Complete this question by entering your answers in the tabs below. Req 1 LLLLLLLL Reg 2 Req3 Reg 4 Reg 5 Req 6A Req 6B Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3 this change takes place and the selling price per ball remains constant at $25, what will be next year's CM ratio break-even point in balls? CM Ratio % Unit sales to break even balls your answers in the tabs below. Req1 Reg 2 Req3 Req 4 Reg 5 Req 6A Req 6B Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will ha next year to earn the same net operating income, $90,000, as last year? (Round your answer to the nearest w Number of balls Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Reg 3 Reqy Reg 5 Req 6A Req 6B Refer again to the data in (2) above. The president feels that the company must raise the selling price of its ba Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what per ball must it charge next year to cover the increased labor costs? Selling price Complete this question by entering your answers in the tabs below. Req1 Reg 2 Req3 Reg 4 Reg 5 Req 6A Reg 6B Refer to the original data. The company is discussing the construction of a new, automated manufacturing plan plant would slash variable expenses per ball by 40%, but it would cause fixed expenses per year to double. If t built, what would be the company's new CM ratio and new break-even point in balls? CM Ratio % Unit sales to break even I balls You in DS Reg 1 Reg 2 Reg 3 Reg 4 Req 5 Req 6A Reg 6B If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, last year? Number of balls Comple this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Req 4 Reg 5 Req 6A Req 6B Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same last year). Prepare a contribution format income statement and compute the degree of operating leverage. Northwood Company Contribution Income Statement 0 $ 0 Net operating income Degree of operating loverage